Question 1

A monopoly market is characterized by a single seller of a product which has few, if any suitable substitutes.

Accepted Answer

A) True 
 B)False

Question 2

A monopoly will be maximizing profits if it is operating at the point where:

Accepted Answer

A)  price is at a maximum. 
B)  average cost is at a minimum. 
C)  average cost is at a maximum. 
D)  marginal cost is at a minimum. 
E)  marginal revenue = marginal cost. 
A)  price is at a maximum. 
B)  average cost is at a minimum. 
C)  average cost is at a maximum. 
D)  marginal cost is at a minimum. 
E)  marginal revenue = marginal cost.

Question 3

To earn an economic profit in the short-run, a monopolist sets marginal revenue equal to zero.

Accepted Answer

A) True 
 B)False

Question 4

An industry in which total costs are kept to a minimum because only one firm serves the whole market is called a:

Accepted Answer

A)  natural monopoly. 
B)  competitive monopoly. 
C)  patent monopoly. 
D)  limit monopoly. 
A)  natural monopoly. 
B)  competitive monopoly. 
C)  patent monopoly. 
D)  limit monopoly.

Question 5

Which of the following firms best fits the definition of a monopoly?

Accepted Answer

A)  General Motors 
B)  Exxon Mobile 
C)  Local electric utility 
D)  AT&T 
A)  General Motors 
B)  Exxon Mobile 
C)  Local electric utility 
D)  AT&T

Question 6

The demand curve any monopolist uses in making output decisions is:

Accepted Answer

A)  the same as the demand curve facing a perfectly competitive firm. 
B)  vertical, because there are no close substitutes for its product. 
C)  horizontal, because there are no close substitutes for its product. 
D)  the same as the market demand curve. 
E)  perfectly inelastic. 
A)  the same as the demand curve facing a perfectly competitive firm. 
B)  vertical, because there are no close substitutes for its product. 
C)  horizontal, because there are no close substitutes for its product. 
D)  the same as the market demand curve. 
E)  perfectly inelastic.

Question 7

Exhibit 8-1  Monopolist's demand curve   At an output of 100 units, marginal revenue for a monopolist with the demand curve shown in Exhibit 8-1 would be:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  infinity. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  infinity.

Question 8

Costs in a natural monopoly are lower because there is only one producer.

Accepted Answer

A) True 
 B)False

Question 9

Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:

Accepted Answer

A)  higher price and sell more. 
B)  lower price and sell more. 
C)  higher price and sell less. 
D)  lower price and sell less. 
E)  similar price and sell the same. 
A)  higher price and sell more. 
B)  lower price and sell more. 
C)  higher price and sell less. 
D)  lower price and sell less. 
E)  similar price and sell the same.

Question 10

If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost, the firm should:

Accepted Answer

A)  shut down. 
B)  expand output. 
C)  maintain the current output. 
D)  reduce output (but still produce). 
E)  raise prices. 
A)  shut down. 
B)  expand output. 
C)  maintain the current output. 
D)  reduce output (but still produce). 
E)  raise prices.

Question 11

Which of the following best e xplains why the monopolist's marginal revenue is less than the selling price?

Accepted Answer

A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 12

To maximize its profit, a monopoly should choose a price where demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  vertical. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  vertical.

Question 13

The monopolist faces:

Accepted Answer

A)  a perfectly inelastic demand curve. 
B)  a perfectly elastic demand curve. 
C)  the entire market demand curve. 
D)  all of the above. 
A)  a perfectly inelastic demand curve. 
B)  a perfectly elastic demand curve. 
C)  the entire market demand curve. 
D)  all of the above.

Question 14

If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a monopoly, we can expect:

Accepted Answer

A)  less pizza to be sold at a higher price. 
B)  more pizza to be sold at a higher price. 
C)  less pizza to be sold at a lower price. 
D)  more pizza to be sold at a lower price. 
E)  the same amount of pizza to be sold at the same price. 
A)  less pizza to be sold at a higher price. 
B)  more pizza to be sold at a higher price. 
C)  less pizza to be sold at a lower price. 
D)  more pizza to be sold at a lower price. 
E)  the same amount of pizza to be sold at the same price.

Question 15

The two theoretical extremes of the market structure spectrum are occupied at one end by perfect competition and on the other end by monopoly.

Accepted Answer

A) True 
 B)False

A monopoly market is characterized by a single seller of a product which has few, if any suitable substitutes.

A monopoly will be maximizing profits if it is operating at the point where:

To earn an economic profit in the short-run, a monopolist sets marginal revenue equal to zero.

An industry in which total costs are kept to a minimum because only one firm serves the whole market is called a:

Which of the following firms best fits the definition of a monopoly?

The demand curve any monopolist uses in making output decisions is:

Exhibit 8-1 Monopolist's demand curve At an output of 100 units, marginal revenue for a monopolist with the demand curve shown in Exhibit 8-1 would be:

Costs in a natural monopoly are lower because there is only one producer.

Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:

If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost, the firm should:

Which of the following best e xplains why the monopolist's marginal revenue is less than the selling price?

To maximize its profit, a monopoly should choose a price where demand is:

The monopolist faces:

If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a monopoly, we can expect:

The two theoretical extremes of the market structure spectrum are occupied at one end by perfect competition and on the other end by monopoly.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Exam 8: Monopoly

A monopoly market is characterized by a single seller of a product which has few, if any suitable substitutes.

A monopoly will be maximizing profits if it is operating at the point where:

To earn an economic profit in the short-run, a monopolist sets marginal revenue equal to zero.

An industry in which total costs are kept to a minimum because only one firm serves the whole market is called a:

Which of the following firms best fits the definition of a monopoly?

The demand curve any monopolist uses in making output decisions is:

Exhibit 8-1 Monopolist's demand curve At an output of 100 units, marginal revenue for a monopolist with the demand curve shown in Exhibit 8-1 would be:

Costs in a natural monopoly are lower because there is only one producer.

Compared to a perfectly competitive firm with the same cost structure, a monopoly firm will charge a:

If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost, the firm should:

Which of the following best e xplains why the monopolist's marginal revenue is less than the selling price?

To maximize its profit, a monopoly should choose a price where demand is:

The monopolist faces:

If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a monopoly, we can expect:

The two theoretical extremes of the market structure spectrum are occupied at one end by perfect competition and on the other end by monopoly.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters